News

EU launches antitrust probe of Apple, publishers

By Charles Starrett ● Tuesday, December 6, 2011

The European Commission—the executive body of the European Union—has launched a probe into whether Apple helped major publishing houses illegally raise prices for e-books when it launched the iBookstore. Apple was notably the first retailer of digital books to allow publishers to use the so-called agency model, under which publishers set the price at which books are sold to consumers. “The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices,” the body said in a statement. Also included in the probe are Hachette Livre, Harper Collins, Simon & Schuster, Penguin, and Macmillan.

Comments

1

This has been a long time coming, and while no party is blameless, Apple was particularly cavalier about the ramifications of the agency model for the consumer, only caring about the fastest way to make their iBooks store comparable to Amazon & B&N.

Posted by Code Monkey in Midstate New York on December 6, 2011 at 12:23 PM (CST)

2

ah, the sinking ship the EU clinging desperately to any means of income will now try to penalize a company for an influx of cash by means of a fine.
all countries who entered into the EU are now bound to it’s demise. No country can leave and recreate their own currency as it is no longer accepted or recognized.
the U in EU should have been the first reason for all countries to steer clear.

Posted by Scottrey on December 6, 2011 at 12:47 PM (CST)

3

@2: Ah, look, a kneejerk anti-EU screed from someone absolutely clueless to any of the facts of this case.

For the record, preliminary investigations into this are going on throughout the world including the U.S.. The EU just happened to be first to officially start the investigation.

This is a very dirty, very anti-consumer price fixing collusion that is going to result in fines from many countries, not just the E.U..

Posted by Code Monkey in Midstate New York on December 6, 2011 at 1:10 PM (CST)

4

To get people up to speed:

In publishing, the publishing house keeps 88% of the wholesale price of a physical book. The person who did all the actual writing gets to keep 12% of the wholesale price (minus any advance, of course). This is “justified” because the publishing house, in addition to the matters of editing, formatting, and advertising, is also dealing with the costly business of printing, shipping, storage, and handling the inevitable returns and refunds from the rampant over printing that routinely takes place in the industry. When eBooks first became more or less mainstream, this same model was employed: publishers sold copies of the digital book to distributors at wholesale prices, and the distributors were free to price them how they wanted.

But a funny thing happened: if you can buy a copy of a digital book at the same wholesale price as physical book, but there is no storage, shipping, or returns to deal with, retail distributors could price them much lower than physical copies and still turn an even larger profit. Now, even though, this would appear to benefit the publishing houses as much as the retailers, the publishers freaked out because they know something that most newer authors are getting wise to: if you choose to focus on eBook sales, you don’t need giant publishing houses. You can self publish or go with an independent service like SmashWords or BackMyBook, and wind up keeping 70% of the sale price for yourself instead of 12% of the wholesale price. Authors are looking at a world where they can sell 5,000 copies of an eBook for $3.99 and make more money than selling 15,000 copies of the same book for $14.99 through one of the big six publishers.

Enter the agency model.

Under the agency model, the publisher sets the price. All retailers may not charge anything other than the publisher’s stated price, and they may only keep 30% of that price. 70% of the sale price goes to the publisher, and the author gets their 12% of 70%.

Until Apple, the publishers were unable to get Amazon & B&N to agree to the agency sales model. There’s simply no benefit to the retailer to allow the publishers to set the prices, and there is no flexibility to compete with other retailers. Apple didn’t care about any of that, they just wanted the most expedient way to make sure when the iBook store opened that its inventory would be competitive with Amazon & B&N, and the fixed prices would be a cherry on top since, unlike with music, Amazon would not be able to choose to operate at lower profits and beat them on price. The publishers used this to leverage Amazon & B&N to agree to the sales model under the threat that Apple would, once again, dominate a media distribution industry and Amazon and B&N would lose the right to sell any titles Apple chose to carry in their iBook store under the agency model.

If the six biggest publishers coming together to form a publishing cartel and then finding a willing partner in Apple to force all eBook retailers to agree to fix prices across the globe is your idea of the free market, well, I disagree.

Posted by Code Monkey in Midstate New York on December 6, 2011 at 1:39 PM (CST)

5

down boy. code monkey you really need to find something to do with your time.
although they may be in the right here, the EU is wrong in every imaginable way.

Posted by Scottrey on December 6, 2011 at 7:01 PM (CST)

6

@5: And, again, your utterly baseless wingnut political screeds have no place whatsoever in this story, never mind that your last statement is absolutely meaningless due to its self invalidation.

Posted by Code Monkey in Midstate New York on December 6, 2011 at 9:04 PM (CST)

7

Code Monkey, I didn’t know that you were the moderator here.

My comment is not too far off base seeing that the EU has done nothing but take away all individuality of every country who has entered. They have squashed culture and have hindered small businesses in each country.

Besides, what is it to you? All you ever do here is come and complain about apple and how much you despise them. Seriously, get help, you might live longer if you would just stop with all your anger.

Posted by Scottrey on December 7, 2011 at 1:00 PM (CST)

8

I’ll live just fine, thank you.

Now, if you’d like to diagram where the typical anti-EU bashing intersects with a very standard consumer protection / anti price fixing investigation that is taking part globally, I’m all “ears”.

Otherwise, as I said, it is irrelevant to the story, as are your standard ad hominem anti code monkey deflections.

Posted by Code Monkey in Midstate New York on December 7, 2011 at 3:42 PM (CST)